TS Kalyanaraman believes in less margin, more turnover

TS Kalyanaraman is beloved by his customers and detested by his rivals for bringing transparency to jewellery sales in India. He opened a shop in Kerala in 1993 and taught customers how to test the purity of their gold to expose cheating craftsmen. He was also the first jeweller in town to attach price tags to his gold and gem collection, angering competitors who accused him of ruining the trade.

Two decades later, the 65-year-old has become a billionaire as a 12-year rally in gold prices fails to damp demand in India, the world’s largest consumer of the precious metal. He owns 44 stores in the country and plans to open 36 more by March 2014, including five in the Middle East. “Less profit, more turnover; that is what we believe in,” Kalyanaraman, chairman of Kalyan Jewellers, said. “Be as transparent as you can in your trade. The big thing in life is trust.” Kalyanaraman’s closely held Kalyan Jewellers is valued at about $1 billion, according to the Bloomberg Billionaires Index. The estimate is based on the average enterprise valueto-earnings before interest, tax, depreciation and amortisation and price-to-earnings ratio of three publicly traded peers: Titan Industries, Gitanjali Gems and Rajesh Exports. Kalyan Jewellers posted revenue of . 9,500 crore ($1.8 billion) and Ebitda of . 295 crore in the year ended March 31. It has net debt of . 760. He has other assets worth about . 350 crore, according to Sanjay Raghuraman, chief operating officer of Kalyan Jewellers. BILLIONAIRE’S BRAND “I don’t calculate my net worth,” said Kalyanaraman, when asked about his status as a billionaire. “I am more keen to trade, develop my brand, but you may be right.” He has never appeared on an international wealth ranking. He recently set up a property company, developing apartment units and villas in Thrissur. Kalyan Jewellers is spending about . 3,000 crore to expand in the world’s secondmost populous nation, including opening jewellery shops in Mumbai. As the company grows, he is using the appeal of film stars to woo customers. Aishwarya Rai is one of the brand ambassadors. “She is a woman icon,” Kalyanaraman said. “We wanted somebody who wears our jewellery, who endorses our product to be the most beautiful woman in the world.” The billionaire is the first owner of a private jet in Kerala. He bought the seven-seater Embraer Phenom 100 about a year ago for . 30 crore to visit his chain of jewellery shops in the other parts of India. “It was only done to save time because time is money; nothing connected with luxury,” he said. “Our stores are spread across very small towns where there are airports but there are no frequent flights. For just a oneor two-hour job, I would spend one-a-half days because I would go there and come back only the next day.” Demand in India, the world’s largest consumer of gold in 2011, climbed 9% in the quarter ending September 30 even as global use declined 11%, according to the World Gold Council. The jewellery market in the South Asian nation is valued at $16 billion to $18 billion, according to Firstcall India Equity Advisors while New Delhi-based consultants AM Mindpower Solutions estimate sales of gold ornaments may reach $41.3 billion in three to four years. WEDDING TRADITION India consumes 30% of the global gold supply, according to the council. More than half of gold jewellery is bought for weddings. South India accounts for 45% of the total jewellery business in the country, according to Firstcall. “We don’t find it tough to sell gold; people love to buy jewelry,” Kalyanaraman said. “The only way to make your wife, sister or lover happy is to give them something that they love.” Bloomberg

Policy makers across the world favour weaker currencies as they bank on exports to boost growth

Jack Lew’s first act once he becomes US Treasury secretary will be to tell alie. On Day One as Timothy Geithner’s successor, Lew is bound to say “I support a strong dollar” to reassure markets that there will be no change in long-standing US policy.

Nothing could be further from the truth, though, as the yen trades at 2-1/2-year lows and the world considers a response to Japan’s blitz on money markets. Get ready for Currency Wars 2.0. In a world in which growth is harder to come by, policy making verges on becoming a zerosum game. Officials in the US and China were caught flatfooted by how quickly Japanese Prime Minister Shinzo Abe turned the tables in currency markets with a few vague pledges of change. Rest assured that some big responses are on the way. “Japan has restarted the currency war by its open-policy goal of a weaker yen, which has surprised everyone by its success,” says Simon Grose-Hodge, head of investment strategy for South Asia at LGT Group in Singapore. “No country wants to be priced out of an already challenging export environment.” Take China’s incoming President Xi Jinping, who is walking into a positively treacherous situation in Beijing. He must act fast to rein in corruption, grapple with an unruly local media and tackle the pollution that obscures the sun and threatens public health. The last thing Xi needs is a plunge in exports as exchange rates move against him. The same goes for South Korean Presidentelect Park Geun Hye. Expect policy makers throughout Asia to act, too. ASIA ACTS Benigno Aquino, the president of the Philippines, says his government may borrow dollars onshore to temper the peso’s strength. Thai Finance Minister Kittiratt Na-Ranong is getting an earful from exporters and says he’s reviewing policy changes. The sense of urgency is rising as Akira Amari, Japan’s economic minister, joins the Bank of Japan in a campaign to accelerate the yen’s decline. European officials are none too happy, as evidenced by Luxembourg Prime Minister Jean-Claude Juncker calling the euro “dangerously high”. It’s a reminder of how bizarre the region’s crisis has been. Although Europe has endured a triumvirate of debacles — debt, banking and politics — the euro hasn’t been a source of trouble. That is, unless you consider how fallout from the yen might hurt exports. Swiss and Russian officials also are sounding the alarm. The US is wary, as well. A key goal for Barack Obama’s second term is to resurrect the nation’s manufacturing sector. Nothing would help that process more than a weaker dollar, and the Federal Reserve’s ever-expanding balance sheet may limit the currency’s gains. Japan can’t expect to sustain the yen’s decline for long unless the Group of Seven nations backs it. The strength of the Japanese currency, after all, was always more about the dollar and the euro being less appealing in relative terms than the yen. And now, as optimists seek Japanese assets amid hopes that Abe will end deflation, you have to figure that a yen rebound is inevitable. That’s why traders are looking for a material change in Japanese policy. Will they get it? Buying more foreign debt might help, but the purchases would have to be huge to matter. Japan would need to add significantly to its $1.2-trillion stockpile of currency reserves, something officials in Tokyo may be reluctant to do. The year ahead will see everyone simultaneously looking to export their way out of trouble. At best, this global race to the bottom will fail; at worst, it will lead to market swings that sap confidence and stifle growth. If Lew really is sincere about wanting a strong dollar, he will surely get it while everyone else heads the other way. — Bloomberg

U.S. economic growth pulled back further during the second quarter of the year as consumer spending slowed–a reading that suggests domestic fiscal worries may becoming a more significant drag. The nation’s gross domestic product–the value of all goods and services produced–grew at an annual rate of 1.5% between April and June, the Commerce Department said Friday. The reading is down from the upwardly revised 2.0% growth rate during the prior three months and a 4.1% rate in the fourth quarter of 2011. Economists surveyed by Dow Jones Newswires had expected 1.3% annualized growth during the second quarter…The economy has grown for 12 consecutive quarters, covering all but the first months of the president’s administration, but the gains have been very mild by historical standards and haven’t been enough to significantly push down the unemployment rate. Growth slowed from the prior quarter as the pace of consumer spending eased and state and local governments continued to cut.

Comment

Today the Department of Commerce released GDP statistics for the second quarter of 2012. Below we highlight various measures of GDP, the stock market’s capitalization, and money supply. A complete list of our market capitalization charts can be found here[2].

As of June 30, 2012, stock market capitalization was 103.73% of nominal GDP ($16.18 trillion divided by $15.60 trillion).

Click to enlarge:

[3]

As of June 30, 2012 M2 as a percentage of stock market capitalization was 61.47% ($9.94 trillion divided by $16.18 trillion).

[4]

As of June 30, 2012 the two-year change in the stock market’s capitalization increased by $3.65 trillion or 23.38% of the size of nominal GDP.